Personal Capital - The Future of Wealth Management

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Xignite would like to introduce you to Personal Capital (www.personalcapital.com),
which was just launched in September, but already has made quite
an impact in the wealth management industry winning "Best in
Show" at Finovate Fall 2011, and being described by Bloomberg
Businessweek as "Wealth Management for the Internet Age".

Personal Capital's goal is to offer a simple wealth management
solution for the complex lives of their affluent clients. The
firm was founded by some of the leading financial technology and
e-finance executives, and is backed by a well-known Silicon
Valley venture capital firm.

We recently sat down with Bill Harris, Chief Executive Officer of
Personal Capital, who was formerly CEO of PayPal and Intuit, and
Jay Shah, Chief Information Officer of Personal Capital, who was
formerly CIO of E-Loan.

Q: Why was Personal Capital created?

Bill Harris - We really created Personal Capital to fill a gap
that most of us feel in our everyday lives, that is how to manage
our financial lives, when everything is so fragmented. Many of
us have brokerage accounts, IRAs, 401ks, checking accounts,
credit cards, mortgages, all strewn across multiple institutions,
but there is no one place to go to make sense of it all. No one
place where we can make a rational decision about our finances
and plan for the future. Personal Capital was formed to allow
people to make sense of their complex lives, in a comprehensive
way, so that they can then take action.

Q: How does Personal Capital work?

Bill Harris - It really only takes 15 minutes to understand the
power of Personal Capital. The first 5 minutes you spend linking
all of your accounts to the Personal Capital website. This allows
us to assemble a baseline of your financial situation on at least
a daily basis. The next 5 minutes minutes we present you with an
easy to understand analytic framework that gives you a graphical
representation of your entire financial situation. Finally, in
the last 5 minutes we recommend the ideal asset allocation based
on your financial profile and other factors. All of this is for
free. At this point you can then decide whether you want to work
with one of our advisors so that we can help you manage and
implement your financial plan.

Q: How is Personal Capital different from a more traditional
wealth manager or investment advisor?

Bill Harris - There are a few significant differences but perhaps
the biggest is the mode of interaction. With a more traditional
approach much more face to face interaction is required,
otherwise you don't get very much visibility into your finances.
At most you probably get sent a statement every quarter or so but
that's it. Just establishing your relationship with a traditional
wealth manager can be a pain. It typically involves three trips
to your advisor: (1) You drive to the advisor's office to decide
whether you want to do business with them. (2) You then get back
in your car to go home to gather all of your financial documents
into a shoebox and then deliver it back to the advisor. (3)
Finally you return to the advisor when they have made sense of
your financial situation and are ready to make recommendations.
Obviously, this mode of interaction just doesn't work for busy
people. Personal Capital is different, we offer multiple ways to
interact with us in real-time. We let our clients decide what
works for them.

Q: Why has the wealth management industry evolved so slowly?

Jay Shah - There is no doubt that it has been slow. We have seen
some innovation in the tools used by the wealth manager, but
these are designed for the advisor and do not really impact the
client directly. We've also seen progress on the self-directed
side with online brokerage accounts but essentially the
experience of the traditional wealth manager client has not
changed much over the years.

Bill Harris - I think it has definitely has been slow. When I
look at the last almost 100 years the two biggest innovations
that come to mind have been the brokerage account, which was
developed in the '20's, and the mutual fund, which was developed
in the '60's. The brokerage account allowed individuals access to
a variety of investments. They could, for the first time,
personalize their investment choices. It is very much the
craftsman model. The mutual fund, and more recently the ETF, have
allowed an efficient way to access professional investment
combined with the ease of buying and selling. Mutual funds,
however, are about mass production, one size fits all. The next
innovation that Personal Capital is a part of, will combine the
personalization of the brokerage account, with the efficiency of
the mutual fund industry. This mass customization of the wealth
management industry is being made possible by the Internet and
other technologies.

Q: How would you describe Personal Capital's investment
philosophy?

Bill Harris - Our approach is based on today's accepted academic
investment theory. We do not seek to beat or time the market. We
are not about generating alpha. For us the most important
long-term decision is the allocation decision. We are also very
focused on risk management, and are aware of how harmful
volatility can be. Once we understand our client's financial
situation and goals, we then implement their strategic plan,
using mainly individual securities and ETF's. Finally, we are
very tax sensitive. Pre-tax results are not what will help you
after retirement.

Q: How has Xignite's on-demand market data helped Personal
Capital?

Bill Harris - I'd first like to say that we are huge fans of
Xignite. Your whole web services approach to market data is as
slick as a whistle. We've been delighted with our relationship,
particularly with your ability to meet our tight time-lines for
our September launch.

Really a major part of our business is data management and
aggregation. Ultimately, our goal is to provide our clients with
a simple financial dashboard, so that they can then make an
informed decision about the future. Without Xignite's real-time
market data the information presented to our clients would be
stale and not as actionable.

Q: What are Personal Capital's plans for the future?

Bill Harris - Personal Capital's future plans are centered around
deepening the analysis of our clients' financial lives, while at
the same time broadening our understanding of their entire
financial picture. Finally, we will continue to extend that mode
of interaction with our clients that we talked about earlier. Our
approach is that our clients should be able interact with us
anywhere or anytime, through multiple touch-points, without ever
having to go to a branch. With this in mind we will be releasing
iPad, mobile phones, and some innovative browser-based apps in
the very near future.